Festive-season hopes of a market rebound have been dashed, with Indian equities reeling under a sharp bearish grip. A twin blow from the United States: fresh tariffs on Indian goods and a punitive hike in H-1B visa fees rattled sentiment and triggered one of the steepest market declines of 2025. Relentless selling by foreign investors deepened the rout.
Pranay Aggarwal, Director and CEO of Stoxkart, said that India's short-term market outlook remains cautious due to new U.S. tariffs on pharmaceutical companies, increased H1B visa fees, and a depreciating rupee.
He added that the market trend will be shaped by near-term triggers, including global market movements, U.S. economic data releases, and the direction of foreign investor flows, which collectively influence sentiment, liquidity, and overall market momentum.
The market snapped its three-week winning streak, with the Sensex and Nifty plunging 2.65% each, their sharpest weekly fall in nearly six months.
Broader indices saw even sharper damage as the Nifty Midcap slumped 4.60% and the Smallcap index tumbled 5.10%, intensifying the selloff.
The bearish turn stems from two key policy shocks from U.S. President Trump. The first, an immediate $100,000 “one-time” fee on new H-1B visa applications, is set to raise operating costs for Indian IT companies sharply. The second, a 100% tariff on branded and patented pharmaceutical imports effective October 1, threatens to hit India’s pharma sector hard, further souring market mood.
The pessimism in the market caused by these two policies has completely overshadowed positive domestic cues such as GST reform and gross domestic product (GDP), which grew 7.8% in Q1 (April-June) of FY26, marking a five-quarter high.
“The fall from the recent high was much faster, as the Nifty index tumbled by nearly 800 points in just seven trading sessions. This marks the longest losing streak since March 2025, with the index closing in the red for six consecutive days — a clear indication of intensifying bearish sentiment across sectors,” said Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities. The most significant drag came from the Nifty IT index, which nosedived nearly 8% during the week.
Santosh Meena, Head of Research at Swastika Investmart said that while the immediate impact of these developments on Indian IT and pharma companies may be limited, the outlook has turned uncertain.
On the flows front, FIIs sold aggressively, offloading nearly ₹19,500 crore from equities. DIIs stepped in with about ₹17,500 crore of buying, but a chunk of their flows got absorbed in the ongoing IPO frenzy.
Meena added that retail and HNI traders are showing signs of panic, as 27th September marked one year since the Nifty’s all-time high of 26,277—without delivering any meaningful returns.
“At this point, all eyes are on US–India trade relations for a possible relief rally. On the domestic front, the upcoming RBI policy on 1st October is crucial, with the street divided on whether a rate cut will materialize. The rupee has slipped to all-time lows, and a break below 89 could further dent sentiment. Globally, US macro data, dollar index movement, and crude oil prices will drive near-term direction. Above all, FII flows remain the key determinant for market trend,” stated Meena.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said that foreign portfolio investors (FPIs) pulled out $21 billion from India during the last one year which is the largest outflow from emerging markets during this period. “This FPI outflow has also largely contributed depreciation in INR of 3.5% against the dollar. The elevated valuations in India vis a vis other markets and the tepid earnings growth are the principal reasons behind the FPI pull out,” added Vijayakumar.